The 35-year-old former Arsenal and Wales midfielder retired from playing in April and previously served as Cardiff City’s interim manager for the final three matches of the 2024/25 season.
He succeeds Matt Bloomfield, who was dismissed following Oxford’s relegation from the Championship.
"I wouldn't be sat in this position if I didn't think I was ready," Ramsey told BBC Radio Oxford.
"I've been planning for this now for the last few years.
"As soon as I started these conversations with the club, and I realised how ambitious they were and everything that's in place, I knew this was the right place for me."
During a distinguished playing career spanning more than 500 matches, he worked under renowned managers including Arsene Wenger, Unai Emery, Andrea Pirlo and Maurizio Sarri.